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Research
Dr. Samantak Das Director - Research & Advisory Services+91 (022) 6745 [email protected]
KnightFrank.co.inThis report is published for general information only. Although high standards have been used in
the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the
view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research.
HyderabadMarket Review
The Hyderabad office market witnessed
consistent office space demand during the
first half of the new financial year
2012-2013 (FY13). However, the impact
of regional political upheaval and
unfavourable global economic conditions
were adversely felt across all sectors and
occupiers remained cautious about their
expansion plans. The prime factors working
in favour of the Hyderabad office market
are its reasonable rental values and better
infrastructure, as compared to other IT/ITeS
dominated cities, that aided in sustaining
the office space demand.
The Hyderabad office market is classified
in to different sub-markets. Locations like
Begumpet and SP Road form the Central
Business District (CBD), while Banjara Hills
and Jubilee Hills form the Off-CBD office
markets. Other key micro-markets like
Madhapur, Kondapur and Hitech City form
the Suburban Business District (SBD) and
primarily comprise the IT/ITeS strength of the
region. Another key IT/ITeS hub,Gachibowli,
forms a part of the Peripheral Business
District (PBD). Extensive infrastructure
developments like Outer Ring Road and
radial roads have further led to the growth of
peripheral micro-markets like Shamshabad,
Pocharam and other HADA localities.
The Hyderabad office market had observed
a substantial increase in office space
demand in FY 2011-2012 (FY12) and totalled
absorption of around 5.4 mn.sq.ft during the
year. The first half of FY12 witnessed hectic
activity in the office space market, leading
India Research
october 2012Office Traction @ GlanceKnight Frank
Table 1: Summary of transactionsTransaction H1 FY 2012 H1 FY 2013 Summary (Apr-Sep) (Apr-Sep)
Lease Transactions Total area 3 mn.sq.ft. 2.5 mn.sq.ft. transacted
Weighted Average INR 33/ INR 38/ Value sq.ft./month sq.ft./month
Source: Knight Frank Research
Micro-marketClassification Locations
Central Business District (CBD) Begumpet, SP Road, Punjagutta, Somajiguda, Ameerpet
Off-CBD BanjaraHills,JubileeHills
Suburban Business District (SBD) Hitech City, Madhapur, Kondapur, Manikonda
Peripheral Business District (PBD) Gachibowli, Nanakramguda, Uppal, Pocharam, Shamshabad
the city to record an absorption level of
around 3mn.sq.ft. Substantial demand was
seen during the first half of FY13 as well, with
absorption of about 2.5mn.sq.ft. of office
space during the corresponding period of
April-September. While the second half of
FY12 had witnessed a decline in demand for
office space by 20% over H1 FY12, it seemed
to have picked up pace in the new financial
year. Sectors H1 FY 2012 H1 FY 2013 (Apr-Sep) (Apr-Sep)
IT/ITeS 78% 64%
BFSI 4% 6%
Consulting 11% Nil
Manufacturing 2% 2%
Healthcare/Pharma Nil 23% /Biotech
Other Service Sectors 5% 5%Source: Knight Frank Research
Table 2: Distribution of office space across sectors
The weighted average rental value across
office micro-markets during H1 FY12 stood
at INR 33/sq.ft. per month, while the
weighted average rental value during H1
FY13 increased to INR 38/sq.ft per month,
signifying an increase of 15% between the
two periods.
Substantial demand was seen during the first half of FY 2013 as well with absorption of about 2.5 mn.sq.ft of office space during the period
Sectoral Analysis
Hyderabad office market has primarily been
dominated by the IT/ITeS sector. However,
in the recent months the city has observed
an influx of several non-IT sectors who have
occupied a significant quantum of office
space.
In H1 FY12, the IT/ITeS sector was responsible
for 78% of the total area transacted during
that period. This amounted to approximately
2.3 mn.sq.ft. and constituted of companies
like Facebook, Convergys, Cognizant, IBM,
etc. The sector was hit by global economic
slowdown in the succeeding quarters
and cautious occupier sentiments in the
market led to a decrease in absorption.
Around 64% of the total area transacted was
occupied by the IT/ITeS sector in H1 FY13. Key
transactions were led by companies such as
Accenture, AMD and Amazon.
october 2012
India ResearchDr. Samantak Das Director - Research & Advisory Services +91 (022) 6745 [email protected]
KnightFrank.co.inThis report is published for general information only. Although high standards have been used in
the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the
view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research.
Office Traction @ Glance
Building Occupier Location ApproxArea(sq.ft.)
Divyasree Orion Accenture Raidurga 140,000
Mindspace AMD Madhapur 200,000
Standalone Building Serve All Jubilee Hills 5,000
Sarvottam FMC Technologies Hitech City 17,708
Ascendas IT Park Kofax India Pvt Ltd Hitech City 14,564
My Home Hub Celon Labs Madhapur 30,000
Mindspace Novartis Madhapur 100,000
Divyashree Omega Amazon Hitech City 140,000
Table 3: Select transactions in Hyderabad office market in H1 FY 2013 (Apr-Sep)
Source: Knight Frank Research
The IT/ITeS sector was hit by global economic slowdown and cautious occupier sentiments led to a decrease in the sector’s share of absorption in H1 FY13
The reduction in the share of the IT/ITeS
sector hailed the entry of a number of newer
sectors in the city. While H1 FY12 saw the
prominence of the consulting companies,
the corresponding period in FY13 saw the
healthcare/pharma/biotech industries
gaining ground. These combined sectors
were responsible for the absorption of 23%
of the total office space transacted in the
first half of FY13. Some of the prominent
tenants that took up office space in
Hyderabad include Novartis, Celon Labs,
Ocimum Biotech and Neuland Labs.
Meanwhile,the BFSI sector occupied around
4% of the total space leased out in H1 FY12,
that increased to 6% of the total transacted
space in H1 FY13. Some of the prominent BFSI
companies that took up office space in the
city during the period H1 FY12 include Bank
of America in Raheja Mindspace and First
America in Ascendas IT Park, both located
in Hitech City, and ICICI Lombard in ICICI
Towers, located in Gachibowli. On the other
hand, the first half of FY13 saw office space
transactions by BFSI sector companies like
ICICI Bank in Jubilee Hills, Karvy in Hitech
City and L&T Finance in Begumpet.
Another sector, besides IT/ITeS, that
endeavoured to gain foothold in the city’s
office market include the manufacturing
sector. The sector occupied around 2% of the
total office space leased out in both H1 FY12
and H1 FY13.
On the other hand, the consulting sector has
been observed to have lost its sheen in FY13
as compared to H1 FY12, inferred from
Table 2. However, this does not necessarily
depict the sector’s flagging interest in the
city’s office market.
Sectors with nominal office space presence,
that have been clubbed under the section
‘Other service sectors’ include infrastructure,
energy, media, etc. Table 3 lists out some of
the prominent office space transactions that
took place in H1 FY13.
Geographic Analysis
The period H1 FY12 witnessed a consistent
demand for office space across most major
office markets of the city, while H1 FY13
saw the dominance of the suburban micro-
markets.The location-wise share in office
space absorption during the two periods has
been depicted in Charts 1 and 2.
As is evident from the Charts given, the
share of the CBD and Off-CBD locations
increased significantly from 6% in H1 FY12
to 21% in H1 FY13. Thus, while the period
during FY12 saw these micro-markets
lagging behind the SBD and PBD markets,
the scenario has taken a turn in FY13. This
positive trend of demand for centrally
located office spaces has risen mainly due
to the proliferation of non-IT/ITeS sectors in
the city. Some of the key tenants who took
up space in the CBD and Off-CBD micro-
markets in H1 FY13 include SKS Micro-finance
in Begumpet, Bharat Petroleum in Banjara
Hills, Vsoft in Kaveri Hills and Uniten in
Somajiguda.
The SBD continued to be the most preferred
office destination, primarily favoured by the
IT/ITeS sector. The SBD office micro-markets
of Hitech City, Madhapur, Kondapur and
Manikonda have been the prime hubs of
office space transaction activity in the city
and offer Grade A office space at competitive
rentals. These suburban micro-markets
Source: Knight Frank Research
CBD & off CBD - 6%
SBD - 71%
PBD - 23%
Chart 1: Locationwise Share inH1 FY 12 (Apr-Sep)
Source: Knight Frank Research
CBD & off CBD - 21%
SBD - 78%
PBD - 1%
Chart 2: Locationwise Share inH1 FY13 (Apr-Sep)
october 2012
India ResearchDr. Samantak Das Director - Research & Advisory Services +91 (022) 6745 [email protected]
KnightFrank.co.inThis report is published for general information only. Although high standards have been used in
the preparation of the information, analysis, views and projections presented in this report, no legal responsibility can be accepted by Knight Frank Research or Knight Frank for any loss or damage resultant from the contents of this document. As a general report, this material does not necessarily represent the
view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is allowed with proper reference to Knight Frank Research.
Office Traction @ Glance
Table4:Rentalvaluesofofficespacetransactions(inINR/sq.ft/month)Micro-markets H1 FY 2012 (Apr-Sep) H1 FY 2013 (Apr-Sep)
Weighted Weighted Min Max Average Min Max Average
Central Business District(CBD)&Off-CBD 28 55 40 30 58 40
Suburban Business Districts (SBD) 28 63 35 32 60 40
Peripheral Business Districts (PBD) 27 48 33 30 35 31
Source: Knight Frank Research
H1 FY13 saw the dominance of the suburban micro-markets. PBD office locations, which had exhibited a strong foothold in H1 FY12, seemed to have fallen behind in the new financial year
were responsible for occupying a significant
71% of the total office space transacted in
Hyderabad in H1 FY12. With the PBD locations
somewhat relinquishing their stand in the
office market, this share increased to 78%
of the total transacted area in H1 FY13. Some
major office space occupiers of the region
include Amazon and Velocity Networks
in Hitech City, AMD and Micro Excel in
Madhapur, and Novartis in Madhapur.
Meanwhile, the PBD office locations, that
had exhibited a strong foothold in H1
FY12 with 23% of the total office space
absorption, seemed to have fallen behind
in the new financial year. Although micro-
markets such as Uppal, Shamshabad and
Pocharam evinced occupier interest for
large scale requirements during the first
half of FY13, no transaction closures of
notable magnitude were observed in these
markets. A few transactions were observed
to have taken place in Gachibowli and
Nanakramguda, contributing to just 1% of
the total office space absorbed in H1 FY13.
While the previous corresponding period in
FY12 saw a number of IT/ITeS major players
like Cognizant, Amazon, CGI Information
Systems and Conseco taking up a large
quantum of office space in the PBD micro-
markets, FY13 witnessed only a handful of
tenants such as Ene Media and Hiradius.
Table 4 highlights the minimum, maximum
and weighted average of rental values across
micro-markets for H1 FY12 and H1 FY13.
A large variation in rental ranges has been
observed in both these halves across all the
micro-markets of the city. This variation is
on account of the location of the transacted
properties as well as the industry type and
the area occupied. Rental values remained
largely stable during the year on account of
delay in decisions regarding deal closures,
as occupiers chose to move cautiously
amidst continued turbulence in the global
economy.
OutlookThe Hyderabad office market strove to
maintain the momentum witnessed in the
first half of FY 2012 in the new financial year
as well, despite weak sentiments on the
global economic front as well as the political
agitations in the region. However, expansion
activity is expected to remain restrained
owing to the low GDP growth and economic
uncertainty.Hence, the demand for office
space is expected to remain moderate in
the next two quarters. On the infrastructure
front, work on the Hyderabad Metro Rail has
commenced in suburban locations such as
Miyapur and Nagole. The project is estimated
to be completed by July 2017 and will provide
a boost to the city’s realty market. Upcoming
supply in the CBD and off-CBD micro-markets
in the forthcoming quarters can put pressure
on the rentals in the region. However,
Grade A rentals are expected to remain
stable in Hyderabad in the medium term
due to the availability of a variety of space
options across all micro-markets of the city.